Cryptocurrency investors were on edge when the year 2022 arrived. The Price of the Leading Premium Bitcoin (Crypto:Bitcoin) grew by 61%, and Ethereum (crypto:Ethereum) increased by 409% compared to the previous year. But the last significant increase in 2017 was followed by an ice bath in 2018, and major currencies began to decline in November 2021. Was the crypto market heading for another sharp correction?
As it turned out, the mostly positive market momentum of 2021 was mired in bearish trends in the spring of 2022. The stock market fell due to high inflation, Russia's invasion of Ukraine and other macroeconomic problems. Cryptocurrencies followed suit, falling much faster than the S&P 500 over that period.
The calendar for 2023 may answer some important questions that remained unanswered in previous years, determining the course for cryptocurrencies and their investors in the long term. Here's what to expect.
Crypto market predictions for 2023
It is impossible to say exactly what will happen to the cryptocurrency market in 2023 and beyond. There are still more questions than answers. But by following some comprehensive topics related to cryptocurrencies, you will be able to make more effective investment decisions as the market continues to evolve.
You should pay particularly close attention to a few important details:
- Regulation in the United States and abroad.
- Mass introduction of cryptocurrency payments in the market.
- Exchange-traded funds based on bitcoin and other digital currencies.
- Countries that accept Bitcoin (or other digital currencies) as legal tender.
As these problems develop and are resolved, the long-term future of the cryptocurrency sector will be shaped. The picture may begin to take shape by the end of 2022, when governments and blockchain developers will develop their long-term cryptoplans.
However, the series of small steps that began with the creation of bitcoin in 2009 is likely to continue for many more years.
Why cryptocurrency could be the future of money
In one of the best scenarios for 2023 and beyond, regulators around the world can unite in a global cryptocurrency regulatory structure. However, this seems unlikely today, given that international views on cryptocurrencies range from "bitcoin is the official currency" in El Salvador and the Central African Republic to "crypto transactions are illegal" in China. Global unity on this issue seems unlikely in the short term.
Nevertheless, crypto regulation is moving forward at the federal level. The Biden administration has formed a highly qualified team to guide the process of regulating cryptocurrencies, led by US Treasury Secretary Janet Yellen and Gary Gensler, Chairman of the Securities and Exchange Commission. Yellen has been following the sector for many years, although she sometimes takes a skeptical view. Gensler taught courses on bitcoin, blockchain and other cryptocurrency topics at the Massachusetts Institute of Technology in 2018.
As highly qualified people set the tone for future regulation, there is hope that a practical system can be developed for investors, consumers, cryptocurrency companies and traditional banks. Knowledgeable organizers will understand important and meaningful issues, such as the differences between a value storage system such as bitcoin and a complex ledger with smart contracts such as Ethereum. Congress has introduced several bills to regulate cryptocurrencies in the first half of 2022, but the wheels of bureaucracy are moving slowly, and this issue deserves some deep reflection and careful analysis.
As government agencies develop a legal framework and tax regime, cryptocurrencies can find their way into the digital wallets of American consumers on a large scale. But while bitcoin became legal tender in El Salvador in 2021 and the Central African Republic in 2022, the United States is unlikely to follow suit anytime soon.
However, many retailers are likely to start accepting cash payments - with digital currencies such as bitcoin, Litecoin (crypto: LTS) or clone a copy of bitcoin known as Dogecoin (crypto: Doji). The growing use of cryptocurrencies should motivate regulators and policymakers to act more quickly, and blockchain systems should also benefit from widespread use.
The processes will leak into the crypto market over the next few years. Investors cannot tolerate uncertainty, so even a very strict regulatory framework is likely to be an improvement over today's ramshackle oversight.
Why cryptocurrency may not be the future of money
A bright future can be postponed in several ways:
- Policy makers may hesitate and will not be able to create a reasonable regulatory framework in the next two years.
- They may decide that currencies such as bitcoin and Litecoin only serve illegal activities and bad actors, and none of these actions apply to American soil.
- Retailers may reject the unexpected value of digital currencies and instead insist on traditional cash or credit card transactions.
- A sudden wave of security breaches, the failure of technological platforms and other security threats to blockchain-based payment systems can undermine public confidence in digital currencies. For example, algorithmic stablecoins got a bad reputation after the collapse of terawashed (crypto: USDT) in April 2022.
With any combination of these circumstances, the digital currency revolution may take several years. Assuming this finally happens, this could be very different from the bitcoin-induced sea changes that occurred in 2021. In the long run, it seems unlikely that any government or group of countries will completely stop the idea of a cryptocurrency, but this could slow down the movement and send the finished product in different directions.
These risks may seem hypothetical, but they are very real. Ultimately, the cryptocurrency community must coordinate its actions with regulatory authorities around the world. Failure to comply with this requirement can create huge barriers to the progress of the digital currency sector.
That's why the farm should not bet on Bitcoin, Ethereum or crypto in general. This market tends to move in mysterious and unpredictable ways, jumping one year and collapsing the next. Knowledgeable investors want to create a long-term diversified portfolio that can withstand serious setbacks in any particular sector.
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